On April 10, 2026, Acting Attorney General Todd Blanche announced that International Business Machines Corporation (IBM) agreed to pay $17,077,043 to resolve allegations that it violated the False Claims Act (FCA) by failing to comply with anti-discrimination requirements in IBM’s federal contracts. The US Department of Justice (DOJ) alleged that IBM knowingly maintained employment practices that discriminated against applicants and employees based on race, color, national origin, or sex — rendering false IBM’s certifications to the government that it complied with the anti-discrimination requirements set forth in Title VII of the Civil Rights Act of 1964 (Title VII) and Federal Acquisition Regulation (FAR) clauses incorporated in IBM’s federal contracts.
The settlement represents the first FCA resolution under DOJ’s Civil Rights Fraud Initiative — launched last May — and was signed by Brenna Jenny, Deputy Assistant Attorney General for the Commercial Litigation Branch of the Civil Division of DOJ. The scope of covered conduct and settlement methodology provide insight into the way DOJ is evaluating FCA liability based on alleged discrimination, and underscore DOJ’s commitment to aggressively pursue FCA claims involving diversity, equity, and inclusion (DEI) efforts.
The Trump administration has made eliminating what it views as unlawful DEI practices a central enforcement priority. On January 21, 2025, President Trump issued an executive order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (discussed in this Latham Client Alert). On February 5, 2025, then Attorney General Pam Bondi issued a memorandum directing DOJ to “investigate, eliminate, and penalize illegal DEI” programs in the private sector (discussed in this Latham Client Alert). Then, on May 19, 2025, DOJ established the Civil Rights Fraud Initiative, which uses the FCA to pursue claims against federal funding recipients who knowingly violate civil rights laws (discussed in this Latham Client Alert).
More recently, on March 26, 2026, President Trump signed an executive order titled “Addressing DEI Discrimination by Federal Contractors,” which directs federal agencies to include in federal contracts and similar instruments a specific anti-discrimination clause requiring contractors and subcontractors to agree not to engage in “racially discriminatory DEI activities” (discussed in this Latham Client Alert). This executive order requires contractors to acknowledge that compliance with the anti-discrimination clause is “material to the Government’s payment decisions” for purposes of the FCA—a necessary element of an FCA claim.
The FCA settlement appears to arise from a government-initiated investigation, rather than a whistleblower suit. Notably, the settlement agreement is signed by the Deputy Assistant Attorney General. DOJ contends that IBM falsely certified compliance with anti-discrimination provisions in its federal contracts — specifically those set forth in (1) Title VII, which prohibits discrimination against applicants and employees on the basis of race, sex, and other protected characteristics, and (2) FAR 52.222-26 (Equal Opportunity), one of the implementing provisions of the now-revoked Executive Order 11246, which prohibited employment discrimination by federal contractors and required contractors to implement affirmative action plans.“IBM Pays $17 Million to Resolve Allegations of Discrimination Through Illegal DEI Practices,” Press Release, US Dep’t of Justice, Office of Public Affairs, available at https://www.justice.gov/opa/pr/ibm-pays-17-million-resolve-allegations-discrimination-through-illegal-dei-practices; IBM Settlement Agreement, available at https://www.justice.gov/opa/media/1435761/dl. IBM denies DOJ’s allegations, and there has been no determination or admission of liability.
DOJ contends that IBM engaged in the following allegedly discriminatory practices from January 2019 to present:
DOJ contends that IBM “allocated costs to its federal government contracts” related to the above-described practices, and “sought payment and reimbursement under its federal government contracts” for the costs to administer these programs and initiatives during the performance of those contracts.
In addition to DOJ’s evaluation of FCA liability, DOJ’s contention that IBM allocated the costs of the challenged DEI efforts to the government may have informed DOJ’s assessment of damages. In remarks at the Federal Bar Association’s annual Qui Tam conference on February 19, 2026, Deputy Assistant Attorney General Jenny explained that the government could calculate damages based on various methodologies, including the federal funds used to administer DEI programs that DOJ believes were discriminatory.
The $17,077,043 settlement amount reflects a single damages amount of $8,204,348. While it is unknown how that single damages amount was calculated, based on publicly available data, IBM had nearly $9 billion in prime and subcontracts during the relevant period.This data is based on IBM’s prime and sub-awards from 2019 to present listed in USASpending.gov. See International Business Machines Corporation, Recipient Profile, available at: https://www.usaspending.gov/recipient/cae13eb7-b259-520c-9ae0-a46eb3ea2acd-P/all. Notably, the multiplier used in the agreement exceeds the 2x multiplier routinely used when settling FCA cases — despite the fact that IBM received credit for its cooperation during the government’s investigation and for its proactive remedial actions, including terminating or modifying the challenged programs and initiatives.
The IBM settlement likely previews what is to come, given DOJ’s widely touted commitment to use the FCA to investigate DEI-related practices and programs that involve race- and sex-based preferences.
In light of this settlement and DOJ’s heightened enforcement posture, federal contractors should consider the following steps to mitigate risk of FCA liability:
For more information, contact our White Collar Defense & Investigations Practice.